Morgan Stanley, in its fourth round of job cuts this year, will pink-slip 2,200 employees starting last week. Industry-wide, such cuts appear to be accelerating.

Morgan's reduction represents about four percent of its workforce and includes 950 brokers, 100 analysts, and 70 global stock salespeople and traders.

Morgan's cuts join those of virtually every other Wall Street investment bank. In addition to combating falling M&A and brokerage fees by downsizing, such firms are also coming under increasing heat from regulators for everything from insider trading, to inappropriate IPO stock allocations, to putting up analysts' buy-sell recommendations for sale.

In our view, the industry is still plagued with overcapacity built on the excesses of the late Nineties. In other words, we see even more substantial cuts in the future, in addition to fundamental -- and less predictable -- changes in the way such institutions do business.

While such changes are clearly needed to restore investors' trust that the recommendations they're getting aren't based on some analyst's desire to place his children in an exclusive nursery school, we are also concerned that the famously dead-hand of regulation may mean less efficient markets and higher transactions costs for us all.